Erect wall on concrete slab
The garage in our house was converted to living space before we moved in. The only issue is that the floor (hardwood on top of the concrete slab) is very cold. I would highly recommend installing floor heating with insulation before laying down the hardwood or tile, according to the building code requirements in your area, if a cold climate is an issue in your area.
If you are making changes to load bearing walls and installing electrical, you may need building and electrical permits, and if you installing a kitchen you will need plumbing permits. As another person indicated, its best to check the building code in your area. Building without permits can result in your insurance company not covering you in future.